Chennai-based micro finance lending institute Equitas has received a fresh fund infusion of $12.5 million (Rs 50 crore) which would help it enhance its borrowing capacity for micro finance lending. The capital has been raised through compulsorily convertible preference shares from Bellwether Microfinance Fund, Indian Financial Inclusion Fund and MVA Ventures. The present investment takes the the equity in the company from Rs 15.5 crore to Rs 65 crore. The promoters of Equitas plan to invest an additional Rs 5 crore later this year. Intellecap acted as the investment advisor for this deal
Equitas is formed by P.N. Vasudevan, who has over 20 years of experience in the traditional banking industry working with Cholamandalam Investment & Finance Co Ltd and Development Credit Bank. Equitas has the distinction of being a micro-finance institution with the largest startup equity capital of Rs13.5 crore, and with the present round of financing has become the fourth highest capitalised micro finance institution in the country.
Equitas, who is a relatively new player in the microfinance segment of India, was one of the winners of TiE Canaan Entrepreneurship Challenge this year. It has opened up 10 branches in Chennai and 5 in Trichy. Equitas has formed a technical partnership with Unitus Advisors, and it uses centralized all data entry operations which helps it save operational costs. Unitus also has a partnership with Bajaj Allianz Life Insurance Co Ltd. Equitas currently serves over 70,000 clients in Tamil Nadu and by end of the year expects to reach 600,000 clients in Southern India.
Sequoia Capital India had also invested $11.5 million in Hyderabad based MFI SKS Microfinance. Also last year in one of the largest ever deal in microfinance in India, a leading Indian microfinance institution, Share Microfin Ltd, received $27 million investment from Dubai’s Legatum Capital and Aavishkaar Goodwell.
According to a 2007 Deutsche Bank study, the estimated total loan volume from MFIs stands at $25 billion worldwide. The amount of funding required to provide financial services to the world’s unbanked is estimated at more than $250 billion, with the number of microfinance institutions worldwide estimated between 7,500 and 10,000. This sector has seen a lot of investments in India.